South Africa’s Central Bank Chief Kganyago Awarded Another Term

S'thembile Cele and Ntando Thukwana
·3 min read
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(Bloomberg) -- South African President Cyril Ramaphosa reappointed Lesetja Kganyago to another five years at the helm of the central bank, cheering investors by assuring policy continuity as the country prepares for elections that could reshape its political landscape.

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The president also reappointed Kganyago’s deputies Fundi Tshazibana and Rashad Cassim for fresh terms, and named Mampho Modise as another deputy governor, replacing Kuben Naidoo who departed last year.

The rand extended gains after news of the decision, which removes potentially damaging uncertainty about the leadership of the central bank. The currency was trading around 0.3% higher against the dollar at 18.6875 as of 4:15 p.m. in Johannesburg.

Kganyago, 58, has forged a reputation for jealously guarding the institution’s independence as it pursues its mandate for price stability. The governor’s current term is his second and it was due to expire in November. Cassim and Tshazibana’s term was up in July.

“He’s a very good reserve bank governor,” said Annabel Bishop, chief economist at Investec Bank Ltd. “He’s well regarded by the financial markets and by investors.”

The decision comes barely 11 weeks before the country votes in elections on May 29, with polls showing that the ruling African National Congress is at risk of losing its national majority for the first time since taking power 1994.

Read More: South Africa’s Kganyago Roots for Central Bank Independence

The governor of the central bank is picked by the president and Kganyago’s re-selection was not assured.

Some members of the ANC and its union partners have been openly critical of him for holding interest rates high to fight inflation, even as the country struggles with unemployment levels above 30%.

South African economic growth has been hamstrung by an energy crisis and snarled logistics and Kganyago has vigorously defended the central bank by pointing out that those failures — rather than monetary policy — are to blame for the nation’s problems.

What Bloomberg Economists Say...

“The news of Kganyago’s re-appointment will be well received by investors as it signals continuity at one of the country’s most credible institutions, in a year characterized by election-related uncertainty.”

— Yvonne Mhango, Africa Economist

Policymakers will deliver their next interest rate decision on March 27. At their last meeting in January, the MPC voted unanimously to keep rates unchanged for a fourth time in a row at 8.25%.

Inflation, which quickened in January to 5.3%, has been above the midpoint of the central bank’s target band of 3% to 6%, where it prefers to anchor expectations, for almost three years.

Read More: South Africa Central Bank Chief Rules Out Rate Cuts in Short Run

Ramaphosa’s selection of Modise returns the economist to the central bank 15 years after she left for National Treasury, where she is currently the deputy director-general of public finance. She’d also been tipped for the position of director-general at Treasury, but lost out to Duncan Pieterse.

Modise will begin her five-year term April 1.

Read More: South African Central Bank Names Fowkes as Adviser to Governors

Modise’s appointment means that the MPC, which can consist of up to seven members, now has six of its seats filled. The other two panelists are Christopher Loewald, who is the head of economic research, and David Fowkes, an adviser to the governors. They are the only current MPC members who don’t hold the position of governor or deputy and were appointed by Kganyago.

--With assistance from Ana Monteiro and Colleen Goko.

(Updates with late Johannesburg market prices in third paragraph.)

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